SAP ready to battle Oracle in growth markets

by Andrew James

ERP giants SAP AG and Oracle Corp. are getting ready to battle for customers in growth markets like healthcare, insurance and financial services, IT industry experts say.

Ray Wang, a business applications analyst with Forrester Research, says the longtime arch rivals want to increase their customer bases to include more clients in high-growth industries that focus on providing services. Wang predicts that Oracle and SAP, will also concentrate on topping each others efforts in a number of other industries including the insurance, telecommunications, retail and public sectors.

These are big areas of growth and that's really where the new battlegrounds are for Oracle and SAP," Wang said. "They're trying to expand out of their traditional manufacturing [customer] bases."

Differing strategies

To date both companies have chosen to adopt differencing strategies for gowth. Oracle has embarked upon a three-year, 23-company-and-counting acquisition spree; it is seeking to buy its way into new markets by purchasing customer bases of established software firms. SAP on the other hand has been sticking to traditional methods of growing organically.

SAP to change strategy?

There are recent signs, however, which could suggest that SAP is reacting to Oracle's plan by launching a new acquisition strategy of its own. It is fair to say that SAP is no stranger to the acquisition trail, howver up until now the company hasn't been nearly as aggressive toward acquiring technology and customer bases as Oracle has been.

In 2005, SAP purchased Lighthammer Software Development Corp., a supplier of enterprise manufacturing intelligence and collaborative manufacturing software. And this past April, SAP also purchased compliance software vendor Virsa Systems Inc. for an undisclosed sum.

Michael Fauscette, vice president of the applications program at International Data Corporation, says that Oracle's acquisition plan has proven to be successful thus far. And news that SAP is reacting by considering a more aggressive acquisition plan of its own seems to validate that strategy, he said.

"I actually believe that [Oracle] has been successful to maybe very successful and I think that maybe the jury is still out on the very successful part," Fauscette said in a recent interview. "But all the signs point to a very strong strategy that has played out very well for them."

Gene Phifer, lead Oracle analyst with Gartner Inc., predicted recently that the two rivals will also find themselves in a race to offer the most robust set of service oriented architecture (SOA) capabilities. Therefore companies that can provide Oracle and SAP with cutting edge development, compositing or orchestration capabilities may be ripe for acquisition. Phifer also added that he believes Oracle will seek to get into the world of Web 2.0.

"They may be looking at some technology acquisitions to fast-forward their entry into that [market]," he said. "That could include acquiring capabilities around AJAX, around building mash-up types of applications -- everything from blogs, to wikis, to social networks, you name it."